Strongest hydro-balance in 13 years
Fokus week 25 2015
Price falls in the short-term
contracts have temporarily
slowed down. The large
precipitation volumes have
reduced slightly but remain
above the seasonal norm.
The prices for the Danish
and Finnish CfDs have
increased substantially in
line with the large price falls
in the system forwards in
recent months.
Here and now
The price falls in the short-term Nordic forwards slowed down last week
as slightly drier forecasts provided
the power traders with an opportunity
to trade the contracts at a slightly
higher price. Q3 closed at EUR 14.25/
MWh this Monday, which is EUR 0.43/
MWh (3.0%) higher than the same
time last week. The YR-16 contract
did however continue to fall and after
this week it is once again at its lowest
level of trading ever. A hydro-balance
surplus exceeding 25 TWh makes it
very likely that there will be plentiful
hydro reserves to work through after
New Year, too.
The water is staying in the mountains
In spite of large precipitation volumes,
cold temperatures currently mean
that the Nordic water reservoirs are
less full than the seasonal average,
but the hydro-balance still has
an enormous surplus. However,
numerous TWh remain in the
mountains where the snow has yet
to melt. In actual fact, due to the cold
summer weather we have experienced
until now, there is still so much snow
that it seems likely that at least a
couple of TWh will not manage to
melt this summer and will remain in
place until the next flood. This means
that there is already a good chance of
well-filled water reservoirs when we
reach the summer of 2016. In spite of
the hydro-balance surplus currently
exceeding 25 TWh and being at its
highest level since 2002 there are no
guarantees that there will be a surplus
as we enter the New Year. A cold and
dry autumn could rapidly deplete the
surplus and result in increasing prices.
However, the most likely scenario is
that there will be an adequate surplus
of accumulated precipitation when we
reach next year.
Our recommendation
Both YR-16 and YR-17 have come
down to their lowest levels ever and
the falls may very well continue next
week. Firstly because the temperatures look set to rise next week. The
majority of the snow will melt and fill
the water reservoirs before autumn.
Secondly because both the coal and
CO2 prices should fall back somewhat
following the increases last week.
Forward
Week 24
Week 25
Difference
ENOMJUL-15
10,25 EUR/MWh
10,25 EUR/MWh
0,00 EUR/MWh
ENOQ3-15
13,82 EUR/MWh
14,25 EUR/MWh
0,43 EUR/MWh
ENOYR-16
26,20 EUR/MWh
25,85 EUR/MWh
-0,35 EUR/MWh
SYHELQ3-15
12,00 EUR/MWh
10,95 EUR/MWh
-1,05 EUR/MWh
SYOSLQ3-15
-3,33 EUR/MWh
-2,75 EUR/MWh
0,58 EUR/MWh
28 TWh hydro-balance surplus
Forecasts
Precipitation: The amount of
effective precipitation in the
Nordic region has decreased
slightly but the latest 10-day
forecast still predicts 6.9 TWh,
which is 59% more than the seasonal norm. The hydro-balance
surplus has increased further
during last week and is expected
to reach +23.8 TWh in week 26.
That the precipitation volumes in the Nordic region have been remarkable this
winter and spring can be seen from the hydro-balance. In week 23 the analysis
institute Nena calculated the balance surplus to be no less than 28.8 TWh. This
is the largest balance surplus measured by Nena in more than 13 years, since
spring 2002. The exceptionally large volumes of accumulated precipitation go
well with the unusually large price falls experienced by the short-term contracts in the last month. The 2016 contract, which is at its lowest level ever, is
also influenced by the large volumes of water.
More expensive CfDs for the Danes and the Finns
Production and spot: One of the
reasons for the most immediate
contracts in the Nordic energy
market increasing last week
was that the spot prices were
generally higher than expected.
The average during week 24 was
EUR 14.71/MWh. Wind power
production was substantially
below average.
The CfDs
Norway was the only Nordic
country to experience increasing
CfD prices last week. The NO1
Q3-15 CfD increased from EUR
-3.33/MWh to EUR -2.75/MWh.
However, in Finland, following
several weeks of increases,
there was a price fall in the
Q3-15, which fell to EUR 10.95/
MWh. See also the graph on the
left.
Recent weeks have been hard for the Danish and Finnish CfDs for the coming
months and quarters. As is typical in periods with large precipitation volumes,
the Norwegian CfDs have fallen, while there is less use for electricity from
Denmark and Finland. In just over a month the prices for the two Danish Q3-15
CfDs have increased by more than 50% while the Finnish CfD has increased by
almost 30%. The four Swedish CfDs have remained largely unchanged in the
same period and the Norwegian CfDs have fallen.
Sales Manager
Peter Lehm
([email protected])
Telephone: +45 8742 6720
Communicative Analysist
Karsten Sander Nielsen
([email protected])
Telephone: +45 8745-6948